Explanatory Memorandum to COM(2018)328 - Amendment of Regulation (EEC, Euratom) No 1553/89 on the definitive uniform arrangements for the collection of own resources accruing from VAT

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dossier COM(2018)328 - Amendment of Regulation (EEC, Euratom) No 1553/89 on the definitive uniform arrangements for the collection of own resources ...
source COM(2018)328 EN
date 02-05-2018


1. Context of the proposal

The purpose of this proposal is to simplify the Own Resources aspects of Value Added Tax considerably by amending Council Regulation (EEC, Euratom) No 1553/89 1 : the focus is switched to standard-rated supplies (so the weighted average rate will not be needed), while the number of corrections are reduced to an absolute minimum and the financial compensations have been removed. In addition, a common percentage is proposed, based on Member State’s most recent fiscal data.

This proposal constitutes an integral part of the reform of the Own Resources system as set out in the proposal for a Council Decision on the system of Own Resources of the European Union 2 . That reform follows the recommendations proposed of the High-Level Group on Own Resources, which published its final report in December 2016 3 .

The proposal draws on past experiences in administering Own Resources and aims to simplify the calculation of the Own Resource based on Value Added Tax. It also streamlines the practical arrangements. It is explained in more detail in section 5 below.

Given the nature of the Own Resources, their management relies on the correct application of other Union policies, in particular on the internal market and taxation.

2. legal basis, subsidiarity and proportionality

The proposed Regulation has its legal basis in Article 322(2) of the Treaty on the Functioning of the European Union. Article 8(2) of Council Decision 2014/335/EU, Euratom 4 and Article 6(3) of the proposed Own Resources Decision mention that Member States shall make the resources available to the Commission ‘in accordance with regulations’ adopted under Article 322(2) of the Treaty on the Functioning of the European Union. In addition, since this Regulation amends an existing regulation, it is appropriate to use the same type of instrument.

By the nature of the Union budget and the Own Resources that constitute its revenue side, the system of Own Resources and their being made available have to be managed from a Union perspective and this cannot be done by the Member States.

This proposed Regulation complements the already existing ‘making available’ provisions, in particular Regulation (EU, Euratom) No 609/2014 5 .

It is in the interests of the Union and its Member States to ensure that the system of Own Resources works well and the proposed Regulation is designed to facilitate cooperation between them.

3. Results of ex-post evaluations, stakeholder consultations and consultations and impact assessments

This proposal is part of the Own Resources legislative package for the 2021-2027 period. In order to simplify the Own Resource based on Value Added Tax, the current Value Added Tax Own Resources Regulation should be amended.

The explanatory memorandum for the proposal for a new Own Resources Decision provides more information on recent reports and documents analysing the need to reform the Own Resources system.

This proposal is not linked to the Regulatory Fitness Programme. It targets Member States and not microenterprises, small and medium-sized enterprises or other stakeholders. It is in principle neutral on sectoral Union competitiveness and international trade. The proposal has no consequences for the protection of fundamental rights.

4. Budgetary implications

The budgetary implications of this proposal and the Own Resources legislative package are detailed in a Legislative Financial Statement attached to the proposal for the Making Available Regulation for new Own Resources 6 . The reformed Own Resources system, including the reformed system of the Value Added Tax, can be implemented with the same level of administrative appropriations and staff resources as the present system.

5. Other elements

The application of this Regulation will be discussed on a regular basis in the Advisory Committee on Own Resources, as it is currently the case.

The Commission’s proposal may be summarised as follows:

Aricle 1(1) of the proposal deletes the previous subdivision in 6 titles of Regulation (EEC, Euratom) No 1553/89.

Contents

1.

Article 1(2) of the proposal amends Article 1 of Regulation (EEC, Euratom) No 1553/89 as follows:


–Article 1 is updated to reflect the fact that the Value Added Tax Own Resource is to focus on standard-rated supplies to final consumption. It also refers to the uniform call rate referred to in the proposed new Own Resources Decision. The standard rate of Value Added Tax should be understood as the rate of Value Added Tax referred to in Article 96 of Council Directive 2006/112/EC, on the common system of Value Added Tax 7 .

Article 1(3) of the proposal deletes Article 2 of Regulation (EEC, Euratom) No 1553/89.

–The enacting terms have been moved to Article 3, while the non-normative provisions, setting the framework, are now contained in the recitals.

Article 1 i of the proposal replaces Articles 3 and 4 of Regulation (EEC, Euratom) No 1553/89 as follows:

–Article 3(1): to provide an unquestionable and reliable data source, the standard-rated Value Added Tax Own Resource base is to be derived from the total net Value Added Tax receipts collected in a calendar year in each Member State, corrected for the specific territorial issues listed in the Value Added Tax Directive;

–Article 3(2): to arrive at the standard-rated supplies to final consumption, the corrected net receipt is multiplied by the common Union share;

–Article 3(3): as Member States apply different standard rates, the receipts cannot be used to apply the uniform call rate. Therefore, the standard-rated supplies to final consumption should be divided by the Member State’s standard rate to obtain the standard rated Value Added Tax base instead;

–Article 3 i: the uniform call rate is applied to the standard-rated Value Added Tax base to obtain the standard-rated Value Added Tax Own Resource that accrues to the EU budget;

–Article 3(5): where a Member State infringes the Value Added Tax Directive, the collected net Value Added Tax receipts should be corrected to ensure an equal treatment between Member States;

–Article 4: when a Member State, following the proper procedures, chooses to change its standard rate of Value Added Tax, Article 4 provides the standardised method for taking that change into account. The method takes into account the rates before and after the change.

2.

Article 1(5) of the proposal deletes Articles 5 and 6 of Regulation (EEC, Euratom) No 1553/89:


–Articles 5 and 6 are deleted, as the proposal provides for a minimal use of corrections and no compensations.

3.

Article 1(6) of the proposal amends Article 7 of Regulation (EEC, Euratom) No 1553/89 as follows:


–Article 7 remains virtually unchanged. It replaces ‘before’ with ‘by’ at the beginning of paragraph 1. In paragraph 2, it includes the conseuqential changes related to the deletion of Articles 5 and 6, and to the move of Article 11 to Article 4(7) Council Regulation (EU, Euratom) No 20xx/xxxx.

4.

Article 1(7) of the proposal replaces Article 8 of Regulation (EEC, Euratom) No 1553/89:


–Article 8 remains unchanged in essence. It replaces the reference to the ‘VAT resources base’ with ‘standard rated Value Added Tax resource base’.

5.

Article 1(8) of the proposal replaces Article 10 of Regulation (EEC, Euratom) No 1553/89:


–Article 10 remains unchanged in essence but it is amended to reflect the scope of the present proposal. The reference to Articles 5 and 6 has been removed, as it is proposed that compensations and certain corrections will be discontinued. To simplify procedures, Article 10(2) has been changed from ‘The Commission shall examine […]’ to ‘The Commission may adopt […]’.

6.

Article 1(9) of the proposal amends Article 11 of Regulation (EEC, Euratom) No 1553/89:


–Article 11: Article 11(1) is moved to Article 4(7) of Council Regulation (EU, Euratom) No 20xx/xxxx. The moved text remains unchanged in principle, but has been adapted to the fact that the weighted average rate is not part of the present proposal. Article 11(3) has been reformulated to reflect the move of the control provisions to Council Regulation (EU, Euratom) No 20xx/xxxx.

7.

Article 1(10) of the proposal amends Article 12 of Regulation (EEC, Euratom) No 1553/89:


–Article 12 remains unchanged in essence, but it is amended to reflect the scope of the proposal. Member States are required to provide information on Value Added Tax collection in more general terms and only on relevant changes in the administrative processes and procedures for Value Added Tax collection. Also, the reporting period for the Commission has been brought into line with periods laid down in other tax regulations and directives. To assess the effectiveness of Value Added Tax collection procedures, it is more relevant to report on improvements made by Member States to Value Added Tax collection than on the procedures themeselves. The text has been amended accordingly.

8.

Article 1(11) of the proposal replaces Article 13 of Regulation (EEC, Euratom) No 1553/89:


–Article 13: This Article is amended to reflect the scope of the proposal. This is achieved by removing the references to ‘authorisations’.

Article 2 of the proposal deals with its entry into force, application and retroactivity, and its impact on the Value Added Tax Own Resources regime.

This Regulation should enter into force at the same time as the new Own Resources Decision. It is planned that the new Value Added Tax Own Resources regime will apply retroactively from the beginning of the period, i.e., 1 January 2021, so corrections of statements produced before that date will follow the rules in force at the time.

Lastly, there is a general terminological change from ‘VAT resources’ to ‘Value Added Tax Own Resources’.